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Beginner Help: How to go from Target Date Funds to Self Managed Asset Allocation

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  • Beginner Help: How to go from Target Date Funds to Self Managed Asset Allocation

    Hi everyone,

    I currently have most of my retirement money invested in target date funds through Fidelity (401K, 403b, and 457). I have spent the past few months learning about personal finance and investing, and am ready to invest based on my investor policy statement's asset allocation.
    Perhaps this is something I missed during my self-education, but how does one go from TDF to asset allocation?
    Do I just exchange them all at once to match up with my current asset allocation? Or should I move a certain amount of money per month to eventually have everything re-balanced?

    Thank you for any advice. If there is any other information that could be helpful, please let me know.

  • #2
    if everything is in a retirement account (i.e. not a brokerage account where if you sell you might have to pay capital gains tax) you just sell the fund within the plan and buy the funds that align with your AA. Do you have a Roth? I ask because you mention 401k/403b/457 but not Roth. Get a Roth. Don't put bonds in there. Put your bonds probably in 457 over the 403b/401k, assuming all have low expense ratios


    • #3
      Yes you can easily exchange to individual mutual funds (or ETFs if offered) in those tax advantage accounts without penalty, taxes, or capital gains/losses. Each account doesn’t need to have a 3-fund portfolio within them. You are allocating across all of your portfolio accounts.


      • #4
        Yup it's just some clicking.


        • #5
          Yep exchange them for whatever you want. Perfect time to practice managing your own assets too while all of your money is only in tax-advantaged accounts where there aren’t any tax implications with buying and selling of securities


          • #6
            Welcome to the board. This link may be pertinent. Tax efficient allocating & account destination can be very financially beneficial.

            $1 saved = >$1 earned. ✓


            • #7
              You have an asset allocation. It just happens to be the one that is an aggregation of your TDFs. So, you could just select different target date funds within your accounts if you want a different AA. (Later for more aggressive; sooner for more conservative.) However, since your IPS has you picking the funds, I agree with the answers above as far as they go. What you might also consider as part of the IPS is how often you will rebalance to your AA, and how you will do so? The. (TDF funds do this for you. )


              • #8
                WCICON24 EarlyBird
                Thank you everyone for the advice and the links, very helpful. What I'm understanding is that it is ok to just go ahead and move all the TDF to my specific asset allocation all at once.
                JBME I do have a roth ( I didn't mention as it is not invested in a TDF).
                Larry Ragman Good idea about the rebalancing plan. I don't have that yet built into my IPS, but I need to put that in writing.